Mortgage Brokers Offer Consumers Tips To Improve Credit Scores
For Immediate Release
Lombard, IL—As more and more Americans head down the road to homeownership, and mortgage rates remain at steady lows, many consumers are taking advantage of the current rates and purchasing a home or refinancing into a different loan program. Before you check out the neighborhood you plan to settle in, it is important to first learn more about your credit score and how it affects your ability to borrow money for a mortgage.
A credit score is a determined scientific number from 300-850, which indicates the level of risk for repayment of debt to a lender at the time of the credit inquiry. Credit scores are based on your current debt utilization, your payment history including mortgages, credit cards, auto loans and bankruptcy filings, any other public record, how long your credit has been established and a mix of credit types you are using. The number of inquiries about your credit during the last 12 months may or may not be a factor influencing your credit score, depending on all the other factors present in your credit file at the time of the inquiry.
The Illinois Association of Mortgage Brokers (IAMB) recommends that consumers meet with a licensed mortgage professional to discuss how to improve their credit score and profile. During the meeting with their mortgage originator, the IAMB recommends that consumers consider the following tips to improve their credit score:
- All credit card balances should be paid to below 30% of the available credit limit on the card.
- Do not consolidate credit card accounts to one or two cards and close out other accounts. Consolidation of your credit card balances will noticeably distort the appearance of your credit utilization. Having a low balance on several credit cards is better than having a high balance on one or two cards where exceeding more than 30% of your available credit limit would indicate you are a higher credit risk profile.
- Keep your credit card accounts open and active by using your cards at least once every five months, even if it is for a tank of gas. When you receive the bill for a credit card you do not use that often, make sure to pay the bill in full. Do not close accounts without the advice of a knowledgeable mortgage broker, as doing so may negatively impact the balance of the variables weighed by the scoring model in assessing your risk profile and credit score.
- Review your credit report for accuracy at least 90-days before applying for a mortgage. Have any inaccuracies reported and have outdated information in your credit file modified by that specific repository by sending them a written dispute requesting the item be reinvestigated and verified as to its accuracy. You may want to ask your mortgage broker how you go about filing a written dispute with the appropriate repository.
- Have clear and concise documentation to support your claim about why you are filing a dispute request and mail that documentation to the reporting repository with a return receipt requested. The Fair Credit Reporting Act states that the process to make necessary modifications will take approximately 30 days. Individuals who wish to obtain their credit scores and profiles can do so by contacting Equifax, Experian or TransUnion at their respective websites. Consumers, however, must be aware that there will be a fee for the report, unless they have been declined for a credit request based on a repository’s information listed on their credit report.
- Paying off a collection account or judgment will not eliminate it from your credit file. Paid or satisfied negative credit items will show a zero balance, but will not disappear from your credit file for a seven-year period from the occurrence of the negative item. A late or collection account will still be reflected in your credit file even if it has been paid off recently, as it was late or did go to collection therefore it is accurately reported.
For additional information, visit the Consumer Page of the IAMB web site at www.iamb.org.
